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Seed Buy or Sell

Seed Buy or Sell

Seed Buy or Sell

The manager responsible for pricing a product must know how much more will be sold if the vice is lowered and, conversely. how much less will be sold if the price is increased. There is obviously a limit to what the farmer will pay as well as a limit to demand however low the price is set (unless seed is used for human consumption). As prices increase the point is reached where substitutes to bought seed, such as farm saved seed, may be used or the farmer may choose to plant a different crop.

Price

Price can be one of the most effective marketing tools available to a company. Pricing strategies for a product or product line should be established on the basis of reaching short and long-term marketing objectives such as selling a certain quantity, achieving a certain market share or making a given margin over costs. However, prices are often set without taking into account the true cost of production and the effect which that may have on the competitive position of a product or product range.Low price strategies are used where consumers respond very positively to small downward changes in price, but a company may not always gain from setting low prices as more efficient competitors may respond with similar price cuts. If the product is not particularly price sensitive then the net effect of a price reduction can simply mean a reduction in revenue. A company may be tempted to reduce its price where similar or substitute products are also sold or when there is an oversupply. However, seeds can become devalued by selling them cheaply especially where there are real benefits associated with the product. Imported vegetable seeds are often chosen by farmers in preference to locally produced varieties in the belief that they are better because they are more expensive. It is therefore critically important to understand the likely response of the farmer when adopting a low price strategy.

Kaveri has created strong value (FCF) over the past decade and the brokerage remains positive on medium-term growth outlook. It models the company to report revenue and PAT CAGRs of 6.5% and 10.2%, respectively, over FY21-FY23. It values the stock on DCF-based target price of Rs706 (11.3x FY23E). Key risks are sharp increase in competitive pressures and steep increase in input prices. Where subsidies can be justified they should be part of a declared policy of assistance provided to farmers for specific crop development programmes. Subsidies should not be used to compensate for the inefficiency of seed supply organizations and should not discriminate against the private sector by only being available for seed supplied through the public sector. In some countries, the effect of subsidies is to create a great deal of uncertainty and this is a disincentive to private seed supply development. (Source: www.fao.org)

 

 

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